Schemes, Scams, Frauds.

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Fraudulent Credit Card Loss Protection Insurance Phone Scams

One company, offering credit card loss insurance, calls consumers and using scare tactics or misrepresentation says:

	they are a representative of your credit card company such as VISA or MasterCard;
	that you must have credit card protection;
	that they need to verify your credit card information;
	that they have been instructed by the Federal Trade Commission to call credit card holders to obtain their credit card numbers and expiration dates;
	that your credit card numbers may be wrong and you have to divulge your numbers in order to receive credit card protection;
	that they are calling to check the security of your credit card number for possible fraud;
	that they or anyone could get your credit card number off the Internet at anytime and therefore, you need to buy credit card fraud protection with a lifetime guarantee;
	that you are liable for more than $50 of unauthorized charges on your credit card account;
	tell you that a computer bug could make it easy for thieves to place unauthorized charges on your credit card account;
	tell you (or imply) that they are calling from "the security department" and want to activate the protection features on your new card.
	that credit card protection would cost only $99, and
	that you could cancel within 90 days.

Regardless of your decision, they deduct from $289 to $329 from your credit card, without authorization, for protection which is already available by law from your card issuer. Plans like what they offer are both grossly overpriced and not necessary in the first place. In fact, federal law limits consumers' liability for unauthorized charges to $50 per credit card, and there is no time limit for reporting loss, theft, or unauthorized use of a credit card.

They purport to protect you from financial loss resulting from the loss or theft of your credit cards. In addition, they falsely state that you have only 48 hours to report the loss or unauthorized use of your credit card to avoid liability for the charges. Cancellation of the service is virtually impossible due to delays, excuses and busy telephone lines.

Y U Lose

"The Y2K issue had the short-term potential to create a new class of charlatans looking to make a quick profit at the expense of unsuspecting individuals," said John Koskinen, Chair of the President's Council on Year 2000 Conversion.

A Canadian based-company, National Credit Card Protection Ltd. was charged with falsely representing their credit card protection program, including protection against potential Y2K-related problems.

They offered a Y2K protection package which consisted of nothing more than adhesive stickers which were said to safeguard against potential Y2K problems once they were applied to your credit cards.

"These con artists were making money selling imaginary fixes to imaginary problems," said Jodie Bernstein, Director of the FTC's Bureau of Consumer Protection. "They were playing on consumers' fears about the Year 2000 computer bug and its potential impact on financial services."

Pay Up or We'll Call Back

In Missouri, complaints were filed against Canadian hucksters offering to sell a service that would ensure Missourians would no longer receive unwanted telemarketing calls. The cost -- $289.

"These con artists define brazenness and unmitigated gall," said Missouri Attorney General Jay Nixon. "They are making telemarketing calls to sell, at a high price, a useless service that is supposed to protect you from unwanted telemarketing calls."

Turns out that in Missouri, consumers can call a toll-free number run by the state and get their name on a list to stop unwanted telemarketing calls -- at no charge.

Who's Watching Who?

On June 13, 2000, a criminal complaint was issued in the Central District of California, charging a Canadian resident, Mark Wilson, ( aka James Eldon ) with mail, wire, financial institution, and credit-card fraud, after a series of searches and seizures by law enforcement in Canada and the United States.

Wilson, doing business as OPCO INTERNATIONAL INC. ("OPCO") and related companies, as well as AMERICAN FRAUD WATCH SERVICES, INC. ("AFWS"), allegedly operated a fraudulent telemarketing scheme in which U.S. residents were telephonically contacted from Canada in an effort to have those residents disclose their Visa and/or MasterCard numbers to the callers. Those numbers were then billed without authorization for $299.00 each.

Targeting elderly consumers they would also charge consumers a fee of $299 for their credit card protection services and more recently began marketing a fraudulent debt consolidation package for $397.

Wilson allegedly caused his employees to make the following misrepresentations, among others, to victims: 1) that OPCO was their credit card representative; 2) that the victims were qualified to a "gold star" membership from OPCO, which would entitle them to certain services; and 3) that OPCO needed to verify the victims’ credit card number, or were changing the "security codes" on the consumers’ credit cards, in order to induce the victim to read their credit card number to the OPCO employee.

He allegedly used several different factoring companies to process the credit card charges and, as a result, those companies incurred losses from the excessive charge backs realized. At least one factoring company could not absorb the losses which reportedly caused a federally insured financial institution to incur losses in excess of $100,000.

OPCO INTERNATIONAL AGENCIES, INC., 0590739 BC Ltd. d/b/a/ AMERICAN FRAUD WATCH SERVICES, FRAUD WATCH SERVICES, INC., CENTRAL CORPORATE SERVICES, INC.,  CUSTOMER SERVICES INTERNATIONAL NEVADA, INC., DEBT SERVICES INTERNATIONAL, INC., GLOBAL HORIZONS, INC., WAYNE FARROW, CARRIE ELIZABETH HOPE, and MARK E. WILSON,

Fraudulent Fraud Protection

The New York State Consumer Protection Board says it has uncovered the latest scheme in which a telemarketing organization is selling questionable and overpriced protection against telemarketing fraud to "previous victims" of telemarketing fraud.

The board says that a Phoenix-based operation, the Senior Advisory Council, is offering such protection in unsolicited phone calls to elderly victims of a Toronto-based group, Consumer Alliance.

Consumer Alliance victimized thousands of people across the United States who paid $350 for a credit card "protection package" that turned out to be nothing more than brochures and stickers.

Suspected of targeting calls to elderly victims of the Consumer Alliance scheme, the Senior Advisory Council is offering a $247 protection package against telemarketing fraud which authorities claim much of which is available to consumers free of charge, including a telephone-attachment device (value $50) with a recorded message that can be activated to reject unsolicited calls.

The president of the Senior Advisory Council, Edward Longoria, disagreed with the consumer agency on the value of his group's antifraud package and stated that there was "no connection or business relationship" between his organization and Consumer Alliance.

Surprisingly, the Toronto phone number that was being used by Consumer Alliance is now being used by the International Marketing Corporation whose chief executive, Steven Winter, indicated the former operation hasn't existed in two years.

FTC v. FIRST CAPITAL CONSUMER MEMBERSHIP SERVICES, INC., No. 1:00cv00905 (W.D.N.Y)

	First Capital Consumer Membership Services, Inc.
	Worldwide Telcom, Inc., Louis Giambrone, Charles A. Barone
	EPX (Intervenor)

Deceptive practices in violation of Section 5 and the Telemarketing Sales Rule in connection with the sale of credit card loss protection services.

	Complaint 10/23/00, TRO with asset freeze 10/25/00, injunction 11/8/00.
	Motion to intervene by EPX filed 6/7/01.

Operation Protection Deception - Credit Card Protection Scam Busts

10/00 - The FTC filed complaints against six groups of companies and their principals as part of a nationwide enforcement sweep called "Operation Protection Deception" against credit card protection fraud artists and continues to warn consumers that under federal law you are liable only for up to $50 of any unauthorized credit charge on your credit card if it gets stolen and $500 on a stolen debit card, making any additional protection unnecessary.

1) Consumer Repair Services (CRS) of Conyers, Georgia and its principals Mark Steinberg, James DeHart and Frank Ciaravino;

2) First Capital Consumer Membership Services, Inc. of Buffalo, New York, Louis Giambrone, individually and as an officer of First Capital, and World Wide Telecom, Inc. (Worldwide) and Charles Barone, individually and as an officer of First Capital;

3) Forum Marketing Services, Inc. of Seneca, New York, Edward Valasquez, Jr. and William John Valasquez;

4) Advanced Consumer Services of Orlando, Florida, and its principals and d/b/a's Anthony W. Andrews, Tracy A. Andrews, TNT Talks, Inc., and Least Cost Utilities, Inc.;

The FTC slapped Advanced Consumer Services with a $700,000 penalty to help pay back consumers who were suckered by the Orlando-based company's deceptive telemarketing practices of making outlandish claims about the consequences of not buying their worthless credit card "protection" packages.

5) Capital Card Services d/b/a Capital Card Protection of Scottsdale, Arizona and its president Corey M. Harris; and

6) T.S.I. Financial Services (TSI) of Ontario, Canada, 1306506 Ontario Limited, T.S.I. Limited, T.S.I. Service Corp. and T.S.I.'s owners Vinny Bubic and Errol Alexander.

According to the complaints they all violated Section 5 of the Federal Trade Commission Act by:

1) misrepresenting their identity to consumers;
2) misrepresenting consumers' liability for unauthorized credit card charges; and
3) posting unauthorized charges to consumers' credit card accounts.

In addition, the FTC contends that CRS, First Capital and Advanced Consumer Services misrepresented their refund policies to consumers.

Finally, the complaints charge all defendants with violating the Commission's Telemarketing Sales Rule through their misleading sales pitches and that First Capital and Advanced Consumer Services also violated the TSR by failing to disclose the purpose of their calls.

It is alleged that they used boiler rooms nationwide, or in Canada, to sell consumers credit card protection packages that provided no protection at all. After calling a consumer, they sometimes misrepresented themselves as affiliated with a particular credit card issuer or bank to gain their confidence.

Through their pitch, they relied on the consumers' limited knowledge of the United States' credit card protection laws, claiming that if a consumer's card was stolen they could be liable for hundreds, if not thousands, of dollars in unauthorized charges.

At times, the defendants allegedly also said that crooks could get consumers' credit card numbers over the Internet and use these numbers to rack up unauthorized charges - another misrepresentation.

They then immediately billed consumers who accepted their offer between $259 and $400 for the "service" and those consumers who declined the offers were often charged anyway.

Consumers who later attempted to cancel the "protection" were given the runaround by the defendants, hoping to delay consumers from reporting the charge to their credit card issuer. Many consumers were given misleading information about the defendants' refund policies.

Others, who did not want the protection and were billed for it nonetheless, never received a credit card refund.

The Commission also returned to court seeking to reopen the judgment against Creditmart Financial Strategies, Inc. and Maurice Verrelli (Civ. No. C99-1461), who materially misrepresented or omitted information on their financial statements and made false statements about their assets.

The Commission originally had agreed to suspend the final judgment of more than $9 million and require the defendants to pay a lesser amount. Upon discovery of the defendants' false statements, the Commission requested that the court reopen the judgment and assess the full $9 million.

DECEPTIVE TELEMARKETING SCRIPTS

To aid its deceptive pitch, First Capital prepared written scripts for use in telemarketing cardholders.

False Affiliation with Visa/MasterCard

After First Capital’s telemarketer identifies his or her name, the script begins:

"I’m calling from the Credit Card Security Centre of First Capital, regarding the security on your VISA/MC accounts. There is no need to be alarmed, however due to an increase in computer related frauds we have made some very important changes to our policies, and we are trying to reach all cardholders ASAP. My job here today is simply to inform you of these changes and update our files. We have you at [address]. I’d like to issue you the new 1-800-number to call in the event your card is lost or stolen or if an unauthorized charge appears on your statement."

First Capital bolsters its false relationship with Visa and MasterCard, while simultaneously inducing cardholders to disclose their full account number, by noting not only the first number but the sequence of numbers on the card:

"OK, you should see that the card begins with a (4/5) and there are four sets of four numbers across the card."

After the cardholder discloses the number, First Capital wholly omits, or fails to adequately disclose, material terms of the offer and sale of its programs.

"Great. Now you should be receiving your security package in 10 business days. It will outline to you what computer fraud is and how it effects you as a cardholder and as a consumer."

First Capital’s script further provides that, along with a reduction of the "$50 deductible" (which is never explained in the telemarketing pitch as a statutory liability cap), the cardholder

"... will receive a low interest balance consolidation, which will allow you to potentially lower your current rate to as low as 8.5%. This generally can save a cardholder as much as $200.00 to $300.00 annually in fees."

In fact, cardholders do not "receive a low interest balance consolidation" that lowers their rates or annual fees but only a list of banks to which cardholders may apply for credit cards which may, or may not, allow them to consolidate debt at a lower interest rate or save on annual fees.

"You will have 30 days to review the package before making a final decision. However we do hold this amount in order to issue the package."

In fact, First Capital wholly omits in both its scripted telemarketing call and its subsequent written packets any description of the 30-day trial review, cancellation and/or refund procedures, including specifically that cardholders must return the written packet in order to qualify for a refund. First Capital takes the cardholder’s recitation of his or her account number as consent to the ultimate charge for its programs.

"Verification"

Finally, First Capital directs its telemarketers to "transfer" the cardholder to a "Verification Officer," who then ostensibly records the cardholder’s "verification" of his or her authorization and assent to purchase First Capital’s program.

"The last step to complete this process is to speak with a security verification officer. He or she will make sure you understand everything."

In fact, First Capital fails to make sure cardholders "understand everything," in that its "confirmation" or "verification" omits materials terms of the deal and fails to rectify false impressions and half-truths introduced earlier in unrecorded portions of the telemarketing call.

ILLUSTRATIVE RECORDED TELEMARKETING CALL

First Capital’s telemarketers amplify the facial deception and/or omit clarifying statements in their script by diverging from it with further misrepresentations in an effort to secure the cardholder’s account number.

The following is taken from an audio tape of a telemarketing call on August 17, 1999 between First Capital and a witness cooperating with the FBI.

Through such false, fraudulent, misleading and deceptive representations and techniques, First Capital has obtained and caused charges to the account numbers of cardholders.

DECEPTIVE WRITTEN MATERIALS

After First Capital has obtained and/or caused a charge to a cardholder's account number, they sent a letter and accompanying written materials to the cardholder explaining its Credit Card Protection Program and Low Interest Balance Consolidation Programs ("packet") which contains the following items:

	a double-sided introductory letter to "New Members;"
	a document entitled "100% Satisfaction Guarantee!;"
	a purported "agreement...for credit card protection services" titled "This document certifies that the bearer is protected under the First Capital CMS Credit Card Protection Plan;"
	a card-stock folder entitled "Credit Protection Membership" enclosing explanatory items in the "membership package," including an 8 1/2" x 11" fold-out brochure entitled "Credit Protection Guide;" four card-stock inserts, an envelope, and a gift certificate; and two single-sided registration forms--a "Credit Card Registration Form" and a "Documents and Valuables Registration Form; and finally
	a 10-page booklet entitled "Low Interest Balance Consolidation Program," with a loose single-page "Credit Offer Info Sheet" referenced therein.

The packet contains misrepresentations to Minnesota cardholders that are both facially fraudulent, misleading and deceptive and wholly inconsistent with its oral representations during the telemarketing pitch.

 "Exceptional" Customer Service

Throughout its written materials, First Capital variously advertises two toll-free numbers, (800) 556-3740 or (800) 988-7626, as its "Consumer Hotline," "Consumer Complaint Referral Hotline," "Membership Services," "Customer Service," and as its connection to "Customer Service Representatives." In its cover letter to cardholders they state: "We pride ourselves on exceptional customer service at First Capital Consumer Membership Services!"

In fact, First Capital’s customer service is not remotely "exceptional" for cardholders routinely receive busy signals, long delays on hold, transfers and/or disconnection when contacting the toll-free numbers. For instance:

Misrepresentation of Cancellation/Refund Procedures

First Capital represents that cardholders who are "not 100% satisfied" with First Capital’s program will receive a full refund simply by calling its Customer Service Representatives:

In fact, First Capital does not allow cardholders to obtain a prompt refund simply by calling its "courteous" and "knowledgeable" Customer Service Representatives. First Capital requires cardholders to return the packet of written materials in order to qualify for a refund and, even when cardholders do timely return the packet, First Capital fails to issue refunds consistent with both its written and oral representations.

In fact, First Capital’s customer service representatives frequently give you months of reassuring runarounds, contradictory and broken promises - if you can get through - then deceptively shift the "refund" responsibility to cardholders who are left to dispute the charge with their issuing bank or to complain to their local Better Business Bureau or law enforcement agencies.

Coverage & Payment Terms of the "Agreement"

Let it be known that First Capital Consumer Membership Services (hereafter known as First Capital CMS) has entered into an agreement with the bearer of this certificate (hereafter known as The Client) for credit card protection services. The Client has purchased 1 (one) year of credit card protection from First Capital CMS and therefore, as per their verbal agreement, The Client is hereby entitled to receive an additional 9 (nine) years of bonus coverage without incurring any additional charges or loss of coverage.

March 23, 2001 -- Consumer Action, a national nonprofit education and advocacy organization, is cautioning all consumers that it is not affiliated in any way with the "Consumer Action Center," a telemarketer that deceptively sells credit card protection services.

Based on complaints since 1997, that company makes cold calls to individuals to sell useless credit card protection packages. They have tricked people into giving out their credit card numbers and although charged $99-$189, they receive only a worthless folder of information, or in some cases, nothing at all. Existing federal laws offer far greater protections for credit card holders at no charge.

Under the federal Telemarketing Sales Rule, it is illegal to make false or misleading statements to induce consumers to purchase services. The FTC has brought action against many telemarketing companies selling worthless credit card protection, including:

	Bank Card Security Center.
	Tracker Corporation of America. doing business as Consumer Protection Services, sold a worthless credit card protection program for a fee of $189. In a 1998 settlement of the charges, the company was banned from selling credit card protection or registration programs.
	Universal Marketing Services and United Marketing Group. Victims' credit cards were charged up to $199. The company was banned from engaging in, or assisting others in engaging in, telephone sales of credit card registration or credit card protection services.

Other companies the FTC has charged with making false claims about credit card protection services include American Fraud Watch Services, The Ascendix Group, Central Corporate Services, Credit Mart Financial Strategies, Customer Services International Nevada, Debt Services International, Fraud Watch Services, Global Horizons, Liberty Direct, OPCO International Agencies, Source One Publications, and 0590739 BC Ltd.

04/25/02 Under an FTC settlement, Advanced Consumer Services of Orlando and two of its principal officers, Anthony W. Andrews and Tracy A. Andrews, agreed to pay about $700,000 to consumers.

The FTC had alleged that telemarketers working for ACS scared consumers into spending hundreds of dollars each for protection they didn't need against unauthorized credit card charges. Under federal law, cardholders hit with unauthorized charges are liable for only $50 worth of charges to a credit card account and $500 to a debit account.

The telemarketers told consumers they were calling on behalf of their credit card issuers or a government agency and claimed criminals were stealing their credit card numbers, and that they could be held responsible for hundreds or thousands of dollars unless they bought extra protection.

In some cases, consumers were charged for protection packages whether they wanted them or not.

The companies TNT Talks Inc. and Least Cost Utilities Inc., which did business as Advanced Consumer Services, were also defendants in the FTC suit. Under the settlement, which must still be approved by the court, none of the defendants admitted any wrongdoing or liability.

The agreement also permanently bans the defendants from selling any credit-related goods or services. To conduct future telemarketing activities, the defendants must first post a $300,000 bond.

10/26/02 Wisconsin - A customer at New Richmond's S&C Bank - recently got a call from a telemarketer offering to sell her "credit card insurance."

Moments after she hung up on the caller (she doesn't have credit cards), the phone rang again.

"If you hang up on me again, you will be subject to a $5,000 fine and/or arrested," the telemarketer allegedly told her.

Flustered, the woman ended up giving the caller her Social Security number and some other personal information.

The telemarketers tell bank customers that they have to have this coverage - that it's insurance that covers credit card balances - and that they will be charged a certain dollar amount per month for life.

Before agreeing to make a payment, the bank asked for and received a telephone number in Tampa, Fla. Calling to verify the request, the bank was then handed off to other offices in New Mexico, Pennsylvania and, finally, Maryland where the company's officials identified themselves as Security Communications, a firm that specializes in identity theft protection.

Fraud Forum Fined

04/03 - Edward Velasquez and William John Velasquez of New York did not admit or deny guilt but agreed to pay back $131,000 to settle charges that they sold worthless credit-card protection services.

The FTC sued the two men in Oct. 2000, charging that they bilked thousands of consumers by selling them unnecessary credit-card protection services -- sometimes billing them without their consent after obtaining their credit-card numbers for "verification purposes".

Through their company, Forum Marketing Services Inc., the brothers falsely claimed that credit card issuers Visa and MasterCard had changed their policies and would hold consumers liable for unauthorized charges over the $50 federal law limit. The telemarketers offered insurance against such charges, typically for $199 to $299.

They have also agreed to post a $50,000 bond should they decide to get back into the telemarketing business in the future, the FTC said.

05/30/03 Barrie, Ont. —A defunct company that purported to offer low-interest credit cards to elderly women has been fined $500,000 after pleading guilty to defrauding close to 2,000 Americans in a telemarketing scheme.

More than 100 police officers from four different police services, along with officials south of the border, spent a year investigating the scam aimed at elderly women in the United States.

The basis of the original business was sound, court heard Friday.

A business owned by Gordon Levoy, 56, of Collingwood, Ont., sold timeshare resort packages.

But that business operated only during evenings.

During the day, another business, Bio Source Financial, sold credit card fraud protection in 2000.

It sold its product to U.S. residents for a one-time fee of $299 (U.S.) on commission for an unrelated company, Consumer Alliance.

Mr. Levoy, along with vice president Jason Williams and marketing manager Daniel Longo, decided the company would no longer operate as a broker.

They designed and marketed their own Bio Source Financial benefits package.

Customers thought they would get a credit card with an interest rate of 8.5 per cent.

Instead, they received a package containing promotional pamphlets and discount coupons.

It included a list of banks that offered introductory low credit card interest rates.

By March 2001, Bio Source had call centres across central Ontario in Barrie, Owen Sound, and Walkerton as well as its Collingwood base.

Up to 40 telemarketers worked at each call centre selling a low-interest credit card for a one-time fee ranging from $299 to $399 (U.S.) to American residents.

Sales were as high as 600 packages per call centre each week.

From October 2000 to July 2001, Mr. Longo made $95,290 while Mr.. Williams pulled in $337,698.

The estimated value of the fraud is $900,000.

Mr. Williams, 30, of Blue Mountain, Ont., and Mr. Longo, 42, of  Toronto, pleaded guilty to fraud Friday and will be sentenced July 7.

Charges against Mr. Levoy were dropped.

Crown lawyer Joan Barrett asked for 18-month conditional sentences, which would put them under house arrest, but allows exceptions, including daily trips to work.

Mr. Williams would also be fined $50,000.

Lawyers for the men asked for three months' house arrest.

U.S. Federal Trade Commission economist, Dr. W. Russell Porter, concluded in a report the Bio Source package had a liquidation value "most certainly less than zero."

The U.S. commission has launched a civil suit against Bio Source and Mr. Levoy, Mr. Williams and Mr. Longo.

Source: Globe and Mail

Federal Trade Commission v. Forum Marketing, et al.
The Federal Trade Commission announced a settlement in this matter. The complaint alleged that the defendants defrauded thousands of consumers nationwide through a deceptive telemarketing scheme selling credit card loss protection and debt-consolidation services. Among other things, the settlement order requires the defendants to post a $50,000 performance bond before engaging in any telemarketing activities. This case was filed as part of "Operation Protection Deception."

Federal Trade Commission v. Icon America, Inc., et al
The Federal Trade Commission announced the settlement of this matter. The complaint alleged that the defendants deceptively used telemarketing to sell credit card loss protection services to consumers, telling consumers that the company's loss protection services would cover any unauthorized charges due to card theft. Under the terms of the stipulated final order, the defendants and their principals are barred from: (1) making the types of misrepresentations alleged in the complaint; (2) violating the TSR or assisting others in doing so; and (3) selling or transferring their customer lists. The order also contains a suspended judgment for $1.5 million and requires the defendants to pay $25,000 for consumer redress.

Federal Trade Commission v. STF Group, Inc., et al.
The Federal Trade Commission filed a complaint alleging these defendants sold phony credit card loss protection and discount medical cards. The complaint also alleged that the defendants charged consumers' credit cards and debited their bank accounts without authorization.

Scammers Who Pretend to Stop Scammers

Your phone rings, and the caller on the other end identifies himself as a representative of the fraud department of major credit card provider (VISA, American Express, etc.) with no mention of an issuing bank. They will imply that the phone call is a warning for fraudulent activity on your card.

The caller tells you he has identified potentially fraudulent charges on your account. They tell you about specific charges, ranging from $300 to $500, at specific stores which they believe are fraudulent.

After hearing the specifics, many consumers become alarmed, immediately dispute the charges, and ask for them to be removed.

At that point, the caller tells you they will be glad to help, and will postpone the charges in question. Then, once they have your trust, they tell you there is no need to cancel your current card. The caller says he just needs to verify you still have it on you, and asks you to simply read the numbers on the card, including the special three digit "not-in-person" or "card not present" purchase code on the back.

Shortly thereafter they charge your card with an amount just below the $500 questionable purchase mark.

Articles on Credit Card Insurance scams.

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